Sirwin
Sirwin

Fundamental concerns of the Crypto Fintech Sector

By Resh Community | reshcommunity | 27 Jul 2022


Crypto and DeFi have no doubt helped educate a vast variety of people as to how the monetary system functions. Despite smart-contracts giving programers the capacity to create innovative and impressive features, it still faces one major concern that of security. Whilst security may not be a big issue for smart-contracts that have no monetary advantage (such as likes), it certainly poses a huge barrier for the Fintech sector in crypto.

How do I protect myself from these security vulnerabilities?

Whilst difficult to analyze the safety of crypto projects, it is absolutely necessary to vet them properly. This can be done in a number of ways. The first and most common means of trust from an investor is a smart-contract audit by a reputable auditing company. Unfortunately, no matter the auditor some tokens do still collapse. These end up wiping out investors and leaving them with a sour taste.

Why are Audits unreliable?

Audits are unreliable due to a large variety of reasons. Primarily, the auditor is incentivized monetarily to give a project a good score. Whilst they do look for issues, (and a good auditor will always find something), they tend to be weak at finding vulnerabilities that have not been previously used or thought of.

There is like in Terra Luna’s case, a second issue with smart-contract auditors. Typically a smart-contract audit is a security assessment of the code, and a checkup on any logical errors in the code. However, an auditor typically does not look into everything about a token. In the case of Terra Luna, all auditors had given it a green flag. Yet, Luna had a fundamental issue with it’s algorithm’s tokenomics (token economics). If you’re interested in reading more on our take of the Luna collapse, please read this article.

Shitcoins

A second method to protect yourself from these security vulnerabilities is to avoid extremely low-cap cryptocurrencies. These are typically labeled as ‘shitcoins’ as they are small and likely do not survive for long. It can be assumed that 99% of these will die out. Sometimes, large-market cap coins can also be shitcoins (like in the case of Luna), so identifying them and avoiding them is necessary.

Lastly, it is imperative to note the sentence “not your keys, not your coins”. If your funds are staked anywhere, or on any CEX (Centralized Exchange), there is a possibility that they can be compromised. This is due to the fact that it is a new sector in the digital world, open-sourced (open to all, and some are greedy).

The Solution: Do Your Own RESEARCH! (DYOR) And lots of it.

 

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Resh Community
Resh Community

Resh is a community that focuses at bringing news & information to crypto pioneers. We love to inspire newcomers in the space and are keen on developing based on the "community first" motto.


reshcommunity
reshcommunity

Resh is a community of crypto enthusiasts. It's primary focus is to deliver knowledge to all those who seek it. Resh strongly believes that knowledge is power in crypto. As such we inspire our community to take better, more educated decisions. The community obviously has a bias in favor of cryptocurrency (as it's a community of crypto enthusiasts) but will also mention skeptical news. Link: https://blog.resh.community

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